Fund managers and their fees

The growing international popularity of tracker funds helps to explain why SA investors are paying more.

The SA fund management industry is sophisticated, professional, internationally adept … and expensive. The question is whether this expense is justified and if not, are the costs of investing the hard-earned cents of retirees coming down?

In some ways, the second part of the question is the easiest to answer; costs are coming down and respectably fast. Part of the reason is that the SA industry is tightly bound to trends in the international industry, and the megatrend internationally has been a drop in the cost of investing.

Proceed to Source : BusinessLive

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Fees can reduce retirement savings

I recently came across a concept called optimism bias. Ever heard of it? It’s also referred to as the “illusion of invulnerability”. Simply put, it’s the idea that bad things happen to other people, not to you.

It’s a coping mechanism employed by our brains, and I suspect it’s the very thing that high-fee-charging fund managers tap into when they sell you a retirement plan.

You sign up for a retirement annuity and gloss over the fees because you’re sure it won’t make that much difference. Or, you’re confident that your actively managed fund will sufficiently outperform the market and more than make up for the fees in the long run. But when you compare the performance of active and passive investments over time, it turns out that it’s often not the case.

The Standard & Poor’s Indices versus Active Management (Spiva) scorecard compares the performance of actively managed funds, in which managers make specific investment decisions with the goal of outperforming the investment benchmark index, and passive funds, which aim to track rather than beat the market, usually by mimicking an existing index.

The latest scorecard showed that an overwhelming majority of active fund managers underperform the market. In other words, they do worse than their passive counterparts.

Proceed to Source : M&G

Comparison of retirement fund costs: challenges faced by decision-makers

New standardised disclosure measures will expose hidden costs and fees in retirement fund products

Layers of fees and costs in the retirement fund industry, combined with a lack of standardised disclosure, have left employers and trustees struggling to compare products in this market.

The new Association for Savings and Investment South Africa (Asisa) standard on fee disclosure for retirement funds is aimed at improving transparency across the entire retirement industry.

Proceed to Source : Business Live

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